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QUESTION
A company has 8.9 million shares of common stock outstanding and 330,000 5 percent semiannual bonds outstanding, par value $1,000 each.
A company has 8.9 million shares of common stock outstanding and 330,000 5 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $37 per share and has a beta of 1.45, and the bonds have 15 years to maturity and sell for 118 percent of par. The market risk premium is 7.7 percent, T-bills are yielding 4 percent, and the company's tax rate is 40 percent.
What is the firm's market value capital structure?
